All Forum Posts by: Tushar P.

@Tony Kim yes, I get that. My point is that while diversification will take care of the downside, the upside is nowhere close to what growth stocks offer. For example, think of 10 growth stocks, where after 5 years, 4 give average return, 3 go sideways, 2 result in complete loss, and 1 goes 30x. What if 2 went 30x? Most people won’t be able to handle the volatility that precedes the realization of 30x (it wouldn’t happen linearly like real estate), even if they understood what they are investing in.

I am lucky to have entered the workforce 12 years ago and started investing when the stock market was at its lowest. It has only gone up since then - zero effort index funds have yielded 5-6x in last 12 years. I had one stock yield 47x after 5 years (it was under water for first 4 years), another 14x in 11 years (it went to 7x in 4 years and then back to 1x in 7 years), and another is at 5x in 6 years (this has been a linear increase). Exactly 3 years ago I bought a stock that was 80% down 8 months ago, but now sitting at 3x. I expect at least 10x by year 5, but it can also go back to 1x or go up to 100x by year 5. For anyone who had the guts to dump money during March-April last year has a range of 2x-20x. If I can handle such volatility then why should I invest in real estate any further than the 20+ syndications that I already have (mostly invested during second half of 2019) - that’s what I’m struggling with. By the way, I dump 10k/month in index funds, the safety of which is what gives me the stomach to handle stock volatility, besides the fact that I have time on my side.

Also, I have lost money in the stock market, but they seem like noise compared to the gains. Will the losses in real estate ever seem like noise compared to the gains? Remains to be seen. None of the syndications have exited yet, some are 10 year opportunity zone funds.

@Account Closed yes, the hedge fund managers can risk a few million dollars and still have no significant impact to their net worth. They are also willing to have a few lean years as one good year will make the lean years look like noise. For real estate investments, maybe I need to find a reit that pays ~8-10% dividends and doubles it’s stock price every 3-5 years - because that will roughly mimic what the combined portfolio of investments in 20+ syndications is expected to yield. But I guess no such reit exists, hence the need for individual syndications.

What I’m struggling with is that some of these syndications come with a risk of losing all the money (just like hedge funds or risky stocks) but the upside is nowhere as high as what risky investments like hedge funds or stocks can yield. Other option is to invest in less risky syndications but that will lower the potential return. Since my current risk tolerance is quite high, I’m wondering if I should invest in real estate only after a few decades when I’m close to retirement and have lower risk tolerance.

@AJ Singh yes, I see that. Most syndicators are offering what any Tom, Dick, and Harry can deliver. Haven’t seen any syndicator who actually has the confidence on themselves (about all the qualities/experiences they proudly state) to offer promote combined with zero fees.

Like how some of the hedge fund managers who take fees only after promote: e.g. 20% of the profits only after 6% or 8% return, and no asset mgmt fees. 

@Account Closed
 have you come across any syndicator who has the guts/confidence to offer a deal where they have substantial skin in the deal and make absolutely zero money until the LPs make 6% or 8%?

Talking of bonus depreciation, whether it is useful or not to the LPs was discussed briefly here:

https://www.biggerpockets.com/...
 

Make sure you check the forums thoroughly

https://www.biggerpockets.com/...

Tell yourself you are walking away with your deposit back because you don’t have a better option, not because it is fair. The builder wouldn’t have offered you a lower market price or walk away with your deposit if the market had gone the other way. The builder is lucky he is dealing with you. I would not have let him act unethically and get away.

@Melanie Liu do you have free legal plan through your work? I have free access to the best lawyers (including those who specialize in real estate) and I think I should make sending demand letters my new hobby. When I was in a such a situation I made sure that the other party knew I had free access to best lawyers (casually saying “need to check what the lawyer says since I have free access to them”) and then just sending a threatening demand letter did the job. I stopped communicating after the lawyer sent the letter. Good lawyers make realtors redundant and incompetent builders very cooperative.

Just check what kind of legal plan your employer provides. The best option is to get some money from the builder and walk away.

@Tinah Canda what I don’t understand is why is your lawyer acting so spineless. Your lawyer should be able to see through this tactic and turn it around to the seller’s lawyer. 

@Justin Goodrich there are startups in California a few steps ahead already…